Legislative Takings Are Still Takings

The Fifth Amendment’s Takings Clause states that the government may take no property for public use without just compensation. Unfortunately, local governments often see the Takings Clause not as a fundamental safeguard of liberty so much as an inconvenient obstacle getting in the way of preferred policy outcomes.

One way cities have devised to avoid their obligations to provide just compensation is to condition issuance of land-use permits on landowners’ surrendering property rights the government would otherwise have had to pay for (what’s a little extortion between friends). That’s exactly what the City of West Hollywood is attempting to do with a zoning ordinance that requires developers who build multi-unit housing to either (1) sell or rent a percentage of that housing at below-market prices or (2) pay an “in lieu” fee that the city calculates using a formula created by statute.

Shelah and Jonathan Lehrer-Graiwer sought a permit to build an 11-unit development and elected to pay the in-lieu fee under protest, later challenging it as an unconstitutional taking. The trial court, following binding state-court precedent, found in favor of the city, and the California Court of Appeals affirmed. Now the property owners seek U.S. Supreme Court review.

Cato, joined by Reason Foundation and the National Association of Home Builders, and with the assistance of Antonin Scalia Law School’s Supreme Court clinic, has filed a brief supporting that request.

Under the Supreme Court’s decisions in Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994), the government may not require a property owner to surrender a constitutional right (here, to just compensation for a taking of private property) in exchange for permit approval unless there’s an “essential nexus” between the conditions and an alleged harm that would be caused by the development. The conditions must also be roughly proportional to the expected impact.

According to the trial court here, Nollan and Dolan are “inapplicable because the in-lieu fees were assessed pursuant to a generally applicable ordinance rather than an ‘ad hoc’ discretionary permitting decision,” even though there’s no dispute that the fee has no relation whatsoever to any alleged public harm that may result from the new development. The legislative nature of the permit restrictions, the court held, simply forecloses a Fifth Amendment challenge.

But there’s no basis in law or logic for exempting legislatively imposed conditions from Nollan/Dolan analysis. The Supreme Court has never distinguished between legislatively imposed conditions and property-specific conditions imposed by municipal officials. As Justice Thomas remarked in his dissent from the Court’s denial of review in a similar case, “It is not clear why the existence of a taking should turn on the type of governmental entity responsible for the taking.”

There’s little reason to believe legislators are any less prone to seeking a way around the Takings Clause and, indeed, legislators have the ability to target a far broader segment of property owners than agencies engaging in ad hoc determinations. That's why the Supreme Court should take up the case of 616 Croft Ave., LLC v. City of West Hollywood.